Tax Type
Retail Sales and Use Tax
Description
Charges in connection with the creative design materials are subject to the tax
Topic
Basis of Tax
Property Subject to Tax
Date Issued
09-16-2004
September 16, 2004
Re: Request for Ruling: Retail Sales and Use Tax
Dear **********
This is in reply to your letter in which you seek a ruling on behalf of ***** (the "Taxpayer") regarding the application of the sales and use tax to the purchase of design and layout services used in the creation of product manuals. In addition, the Taxpayer submits its letter as a protective claim for refund of use tax paid on such services. I apologize for the delay in the Department's response.
FACTS
The Taxpayer is a manufacturer of household appliances. The Taxpayer includes with each appliance sold a "Use and Care Guide" manual that provides instructions on how to use and maintain the product. The Taxpayer contracts with a company for the creation of the product manuals that include illustrations, computer formatting, layout design, proofing, and film/bluelines. The Taxpayer sends the design and layout to a printer for the production of the product manuals. The Taxpayer requests a ruling on the application of the sales and use tax on the purchase of such services used in creating the "Use and Care Guide" manuals.
DETERMINATION
Virginia Code § 58.1-603 imposes the sales tax upon the "sales price" of tangible personal property sold in Virginia. "Sales price" is defined in Va. Code § 58.1-602 as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale . . . ." (Emphasis added). The effect of these statutes is to ensure that the tax is collected on the entire consideration received, and makes clear that the consideration includes any charges for related services.
The Department addressed a case with a similar set of facts in Public Document (P.D.) 91-71 (4/16/91). The ruling dealt with the purchase of materials used in the design and layout of product manuals used by purchasers of products sold by the taxpayer. In that ruling, the Department upheld the tax on the taxpayer's purchase of design and layout materials that were later provided to printers for their use in the production of product manuals. The purchase of such materials was deemed a taxable purchase of tangible personal property for the taxpayer's own use and consumption because the materials themselves were not resold and did not actually become a physical part of the manuals.
In the situation you present, the Taxpayer is purchasing creative design materials for the development of its product manual that will be used by printers in the production of manuals. Based on the statutes and ruling cited above, the charges in connection with the creative design materials for development of the product manual are subject to the tax when purchased by the Taxpayer and later sent to a printer for production. Based on this ruling, I must deny your protective claim and request for refund in this matter.
The Code of Virginia sections and public document cited, along with other reference documents, are available on-line in the Tax Policy section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions about this response, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
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- Tax Commissioner
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- Kenneth W. Thorson
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AR/45005T
Rulings of the Tax Commissioner